From the Allentown Morning Call
Odds are, lotto ticket a wasted dollar
By Gregory Karp
Allentown Morning Call
December 4, 2005
American life presents myriad
ways to spend money unwisely, but perhaps the dumbest is buying lottery
tickets as some kind of investment plan.
The lottery buzz has reached a fevered pitch lately. In October, the
28-state Powerball jackpot reached $340 million. Then in mid-November
the 12-state Mega Millions jackpot reached $315 million.
But many of the people who bought tickets for those lotteries might not have known just how silly their purchase was.
A 1999 survey showed many Americans with low and moderate incomes
believed they had a better chance of building a $500,000 nest egg for
retirement by playing the lottery than by saving and investing,
according to the survey co-sponsored by the Consumer Federation of
Lotteries have been called, ungraciously, a tax on the stupid. Why?
Because you're twice as likely to drop dead while reading this
newspaper column than you are to win a Powerball jackpot. You're five
times more likely to die in an automobile crash driving to the the
store to buy a lottery ticket than to win the jackpot.
Not to be a buzz kill to all those lottery players, but it's a
mathematical fact. The chance of winning the top prize in a Powerball
lottery is 1 in 146 million. The chances of winning the Mega Millions
last month was 1 in 175 million.
Meanwhile, the chance of dying by snake bite this year is significantly
better, 1 in 96 million, according to the U.S. National Safety Council.
You're more likely to become president of the United States. You're
more likely to become a saint, at least according to the odds.
"Basically, if you're talking about the jackpot, you put down your
dollar and you never see anything back," said Douglas Arnold, director
for the Institute for Mathematics and its Applications at the
University of Minnesota. "That's what the lottery is all about, that
captures it almost perfectly."
Arnold said he does not play the lottery, and he knows no
mathematicians who do, perhaps because they can get their heads around
the ridiculous odds better than the average American.
"It is a bit like riding a roller coaster rather than buying a car:
Fine if that's your idea of fun, but not a good way to get around," he
Rather than a tax on the stupid, lotteries are more accurately a tax on
the hopeless. Only someone at rock bottom with no prospects would
resort to such lousy odds for anything more than fun and whimsy.
If somehow you think spending money on lottery tickets is a smart investment, here are some considerations.
-- Feel the odds
Take an example of a relatively small lottery, where you have a 1 in 14
million chance of winning, vastly better odds than Powerball or Mega
Millions. The odds of winning the small lottery is the same as plunking
down a dollar and betting you can repeatedly flip a coin and have it
come up heads 24 times in a row, according to calculations by Fred
Hoppe, professor of mathematics and statistics at McMaster University
in Hamilton, Ontario.
Take a coin out of your pocket and start flipping to get a sense of how
unlikely that is. Don't forget to plunk a dollar on the table each time.
-- One dumber thing
The only worse investment than playing the lottery is paying for advice
on which numbers to pick when you play the lottery. For example,
lottery-picking service LotteryVault.com charges about $35 for a year's
membership. This pitch is, essentially, you pay them to provide you
with numbers that are more likely to win a lottery that uses randomly
drawn numbers. Think about that for a minute.
Fact is, no number in a fair lottery is better, or more lucky, than another.
-- What if I win?
"Somebody has to win. It might as well be me," the argument goes. The
photos and news reports of the beaming lottery winners make it so
So what if you do win the lottery? The National Endowment for Financial
Education estimated 70 percent of people who receive such windfalls
blow through it in just a few years.
-- Guaranteed winnings
What if you could almost guarantee a vast sum of money? Instead of
buying $1 lottery tickets, put $1 a day into a growth mutual fund
earning 12 percent per year, the historical average return. If you did
that for a newborn girl, she would be a millionaire by age 49. A
25-year-old investing $5 a day would amass about $1.5 million by
retirement at age 65, assuming the same rate of return.
-- For amusement only
What about playing the lottery for fun? Paying $1 for the entertainment
of dreaming about fantastic riches for several days is actually pretty
cheap recreation and provides excellent value. Just don't count on
Gregory Karp is a personal finance writer for The Morning Call,
Allentown, Pa., a Tribune Co. newspaper. E-mail him at
Copyright © 2005, The Morning Call